The value of information on supply risk under random yields

Taesu Cheong, Sang Hwa Song

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

For companies facing challenge of managing unreliable supply sources, one of the operational goals is to increase the overall profit by improving performance of uncertain supply. We here develop stochastic decision frameworks which evaluate necessary information about uncertainties and help newsvendor and suppliers to enhance supply reliability. We first analyze the newsvendor's purchasing decision under supply uncertainty and the derived decision framework is used to identify stochastic dominance conditions. We found that partial supply risk information is sufficient to determine regular ordering quantity, but to improve the overall profit, it is important to gather more information about stochastic dominance conditions.

Original languageEnglish
Pages (from-to)27-38
Number of pages12
JournalTransportation Research Part E: Logistics and Transportation Review
Volume60
DOIs
Publication statusPublished - 2013 Dec

Keywords

  • Newsvendor problem
  • Product shrinkage
  • Supply chain management
  • Supply risk
  • Value of information

ASJC Scopus subject areas

  • Business and International Management
  • Civil and Structural Engineering
  • Transportation

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